Fears of 'mountain of debt' for SA in wake of the coronavirus
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Cape Town - Economists and political analysts
say they fear the massive mountain
of debt awaiting South Africa and the
world at the end of the Covid-19 pandemic.
“Debt is at record highs worldwide. I think it will eventually start an inflationary process,” said Dawie Roodt, an economist with the Efficient Group.
On how to handle the towering pile of IOUs left from the bills run up during the crisis, Roodt said: “All we can do is raise taxes, spend less or borrow more, or inflation. As I see it, a combination of all of these is likely.”
“Austerity should be the answer, but I don’t think our politicians will accept real austerity, yet.”
A political analyst attached to the Department of History and Political Studies at the Nelson Mandela University, Ntsikelelo Breakfast, said: “We should be scared by the debt being incurred. The deep inequality that existed before the pandemic is bound to have deepened and widened because of the lockdown.
“Some say the only way out is to go cap in hand to the IMF, but they forget there is no such thing as a free lunch in politics. If we go to the IMF, their help will come with conditions such as the reduction of government expenditure, say for instance on social grant payments.
“Such a conditionality would be seen as a political assault on the
working class and would in turn affect the ANC’s electoral performance at next year’s local government elections and the general election further down the road. There is no silver bullet out of the coronavirus debt,” said Breakfast.
UWC lecturer and political analyst Dr Shingai Mutizwa-Mangiza said: “Under ordinary circumstances this debt would be scary. Money is being borrowed and we don’t know the
interest rates being charged, etc.
“Nevertheless there will have to be serious discussions on the way forward. There has been some mention of a debt write-off, but it remains to be seen whether this will come to be. I’m inclined to think that there will not be punitive conditions attached to whatever debts we incur as the situation is not peculiar to South Africa.”
Absa economist Peter Worthington said: “We expect the main Budget deficit to hit 16.2% of GDP in the 2020/21 financial year, sending debt soaring to 84% of GDP due to collapsing tax receipts and the costs of the government’s economic response package.
“Stronger growth is the only solution to South Africa’s unsustainable debt dynamics, but some fiscal tightening will also be necessary once the pandemic is over.”